What is a Jumbo loan? ​

Jumbo loan programs are available to help homeowners secure financing for loan amounts that are higher than the conforming conventional limits, even in the millions of dollars. The federal government sets this limit for every county in the United States. For most counties (some counties have high balance loan limits as their average housing costs exceed national averages) the conventional limit is $647,200 for 2022.

Who qualifies for a Jumbo loan?

Because of the higher loan amount, the loan qualification guidelines are more stringent than a conforming conventional loan. To qualify for a Jumbo loan, you must meet the following requirements.

• Credit score of 700 or higher
• Debt-to-income ratio of 45% or less
• Have sufficient reserves in the bank or other asset account

Jumbo loan pros

• Higher loan limits – This is perfect for borrowers needing a higher loan amount. Rather than having to take out multiple mortgages to meet the loan amount, you are seeking, you can tidily take out just one mortgage for the loan amount you need.
• Flexibility – Jumbo loans, like other conventional loans, can be used to purchase or refinance a primary residence, vacation home, or investment property. They also have flexible rate options and loan terms.
• Potential for investment – Jumbo loans can provide you with a chance to make an investment by purchasing a home that has potential to be a significant long-term asset

Jumbo loan cons

• Higher interest rate – Because of the risk associated with a higher loan amount, lenders typically charge higher interest rates for a jumbo loan than a conforming conventional loan.
• Need a clean credit score – While other types of loans are more forgiving, Jumbo loans require a higher credit score to qualify. This means they allow no late payments on credit, and require higher credit scores.
• Higher closing costs – Closing costs are generally based on the loan amount, and since Jumbo loans have higher loan amounts, the closing costs associated with a Jumbo loan also tend to be higher.